Instacart is shaking up the grocery model – one online delivery at a time

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July 27, 2017 04:30 PM EDT

Groceries may be the last retail category on the shelf that people buy online, which makes it ripe for growth and disruption.

But while very few Americans are buying their fresh fruits, eggs and milk on the internet – less than 2 percent of American shoppers buy groceries online, per Kantar Worldpanel data – people *are* looking for convenience when it comes to food spending. Which, explains the 15 percent growth spurt e-commerce groceries saw in 2016, and the increased attention food retailers are paying to consumer hankerings for digital food purchases.

A recent report by the Food Marketing Institute and Nielsen projects online grocery shopping in the U.S. to topple $100 billion by 2015. Companies from Amazon to Walmart as well as smaller grocers and traditional supermarket giants are all competing to satiate shoppers looking for a simpler purchase process. This has also made it possible for new businesses like Instacart to enter the race.

"I’ve been passionate about this space for a long time," Max Mullen, co-founder of Instacart, told Circa. "As compared to people that have done this before, or that are doing this now, we partner very, very deeply with local grocery stores. ...we want people to order from the grocery stores that they love."

How does Instacart work?

First, you download the Instacart app and sign up. Once you're logged in, you plug in your zip code and the app shows you a list of local grocery stores they're partnered with for you to pick from. Then you add your groceries to your cart, check out and Instacart delivers your order to your doorstep that same day.

Instacart

Instacart is an online grocery delivery service. (Credit: Instacart)

Instacart

Mullen and his two co-founders, Apoorva Mehta and Brandon Leonardo, launched the on-demand food service out of a need. The three entrepreneurs had worked on other companies that had failed, but all shared a common goal of wanting to improve delivery services. As shoppers have shifted their spending more and more toward online and mobile, they saw an opening.

"We wanted to create a magical experience in the real world where you could do something on an app and have something delivered to you."

Max Mullen, Instacart Co-Founder

"People are now expecting to be able to make things happen from their phone," Mullen said. "We wanted to create a magical experience in the real world where you could do something on an app and have something delivered to you." So, they wrote a business plan around food delivery.

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Instacart delivers items from Costco Wholesale, PCC Natural Markets and Whole Foods, which Amazon recently snapped up for $13.7 billion. According to TechCrunch, "the company raised $400 million at a $3.4 billion valuation in March." TechCrunch also points out that Instacart isn't without other challenges beyond Amazon's bid for Whole Foods – it has to find a way to scale both in the U.S. and abroad.

What does it take to succeed?

As an entrepreneur, Mullen is a risk-taker. He believes there's two key ingredients to creating a great product: Instinct and data.

"Marrying the two is what's really, really important," he said. "The data for insights on how your customers are using the product and what to do next, and then instinct in the sense that you want have a hypothesis that you're testing or moving toward."

As someone who's helped launch and invests in lots of different projects, what's one company, product or app he wishes he'd created first?

"One of the things that you have to do [when you're getting married] is set up a wedding registry. There's this great company called Zola; they're going to be very successful," Mullen said.